Oil rises towards $72 ahead of inventory data

Oil rose toward $72 a barrel on Wednesday, ahead of key inventory data expected to show a fall in U.S. crude stocks and supported by higher European equities and a weaker U.S. dollar.

U.S. light, sweet crude rose 24 cents to $71.66 a barrel by 1155 GMT, adding to gains that helped oil rise 13 percent since late last week.

London Brent crude gained 25 cents to $74.53 a barrel.

Oil was supported by cautious optimism over global economic recovery after solid European banking results, which lifted European equity markets and pressured the U.S. dollar.

Dollar weakness can make commodities like oil denominated in the currency more attractive to investors.

Expectations that a turnaround in the global economy could lift sagging oil demand has helped send crude up from lows below $33 a barrel in December, with energy traders keeping an eye on equities markets for signs of an economic rebound.

Later, a flurry of key U.S. economic data reports on the labor market, factory orders and the services sector should add direction to stock markets both sides of the Atlantic.

Oil market focus will be on U.S. crude and product stocks.

INVENTORY DATA

The U.S. Energy Information Administration (EIA) is due to release inventory data at 1430 GMT on Wednesday with the market eager for further guidance after Tuesday's numbers from the American Petroleum Institute.

The API data showed crude stocks fell 1.5 million barrels last week but gasoline stocks rose by a further 2.1 million barrels, during what is traditionally the peak fuel usage season in the United States.

According to EIA data last week, gasoline stocks are up 5.3 million barrels from a year ago.

A Reuters poll of analysts forecast an 800,000-barrel build in crude stocks in the week to July 31. The poll also predicted a 1.2-million barrel rise in distillate stocks and a 1.0-million barrel drop in gasoline stocks.

I think the API statistics were weak. A slight drop in crude doesn't mean it is supportive. If you look at gasoline data it is very weak considering the time of year. Traders will be waiting for confirmation from DOE (EIA) later, said Christophe Barret, global oil analyst at Calyon.

Investors were awaiting news from a meeting between trade representatives and Britain's financial powers, the UK Financial Services Authority (FSA) and the UK Treasury, which comes before a third Commodity Futures Trading Commission (CFTC) hearing in Washington over how to rein in speculation.

The UK meeting will discuss market transparency and efficiency, according to the FSA invitation to oil market participants, a copy of which has been seen by Reuters.

Energy traders also were watching an area of thunderstorms in the Atlantic Ocean several hundred miles southwest of the Cape Verde Islands associated with a tropical wave. The U.S. National Hurricane Center said it had less than a 30 percent chance of becoming a tropical storm.